• Zachary Mazur

The Current (Trade) War – Competitive Edge

As the battle between the US and China heats up an important question seems to be lost in the bluster

It is no secret that President Trump's foreign policy has a content problem. While the goals may be clear (America First) and the methods too transparent, the details are completely lost. What seemingly started as a fight to win back lost jobs and investment capital, has been replaced as an overblown negotiating tactic for the vague goal of "fairness" in trade. But let's get back to the main question of those elusive manufacturing jobs, ripped from the hands of hard working Americans by these "unfair Chinese tricks."

At the heart of the issue is a simple economic calculation that large companies make everyday. Will it be cheaper to fire the employees we have now and move them somewhere else? Is there another locale where laborers with the same skills can be had for less money? Since low-skilled workers can easily be replaced anywhere in the world, the job goes to the lowest bidder. For the past thirty years, China has built up the accompanying infrastructure necessary to the make their large population available for manufacturing jobs that used to be held in the United States. Combined with the growth of automation, this caused an exodus away from North America in favor of Asian countries.

This competition for lower labor costs could theoretically lead to a global race to the bottom in terms of labor standards. Our interconnected world no longer requires that the designers of a product and manufacturers need to be in the same place. If left to its own devices, this economic force could encourage slave labor in underdeveloped countries precisely for the purpose of attracting foreign investment. Poor countries could accelerate industrialization, but at the expense of their population. Lousy low paying jobs have been created the world over because of changes in technology and shipping, but there are some stopgaps in place.

Enter the World Trade Organization or WTO. In the mid-1990s, a loose set of treaties governing the post-war capitalist global economic order became solidified into an institution under the WTO. Among the West's Cold War victories, the WTO essentially forced all countries (164 of them), with any hope of engaging in trade with larger economies, to bend to neoliberal visions of free market economics. While setting standards for many aspects of global trade, the WTO also had an important role to play in addressing what was then a growing trend. The sweatshop model of economic growth was on the rise in the 1980s and 90s, and leaders within the WTO saw the threat this presented for low skilled manufacturing jobs in rich countries. I won't assume anyone's intentions in the negative or positive, but the resulting rules required that member states adhere to labor standards of safety and well-being. Countries that were notorious for unsafe work environments, child labor and indentured servitude were at least shamed into introducing new laws. Practices remain varied because, as with all international organizations, they face the dual barriers of domestic sovereignty and a lack of enforcement power. Moreover, the effects of kicking a country out of the WTO could be disastrous for those workers they intend to help. While Bangladesh could easily be accused of violating certain rules, would it be more beneficial for the average factory employee if those manufacturing jobs disappeared? Probably not.

In the current trade war between the US and China, the issue of labor standards has hardly been given a hearing in the public debate. Aside from the automation of certain jobs, the fact that US workers fought for higher wages (and won) made American manufacturing expensive. So much so that international customers could no longer afford many goods made in the US. China and other countries filled that gap and profited heavily, while submitting their populations to the suffering of fast urbanization, subsistence wages and, worst of all, the promise of advancement in a changing world. One avenue for lowering the competitive edge that exists among countries is to return to the WTO standards, increase their power and their goals, even if it costs shareholders a slight drop in their portfolios. The economy will be better off when China, India, Vietnam and Bangladesh have populations full of consumers, people who can afford the trappings of middle class security they have long sought.

There is no mention of labor standards in the current conversation because it has been dictated by a movement on the Right that seems to have lost its way. Whereas the Margaret Thatchers and even American Tea Partiers of years past were narrowly focused on a worldview driven by dollars and two-pence; coldly understanding a transactional global economy. This bygone conservatism claimed that trades are made between consenting sides each receiving benefits. Now we have an irrational force, the Ego economy, that is expert-averse, math-averse, logic-averse. It seems to be that this is a perfect time for the Left to step in and become the movement that appeals to multi-national business interests for the same reasons conservatives have for many years: because of their call for the victory of logic over emotions and stability over ideologically-driven foreign policy.

The political Left is poised to propose a response that makes good business sense while also appealing to a need to address social issues. A plurality of the population of the world would support the idea that workers deserve to receive a living wage. At the same time, living wages across the board would even the playing field and eliminate at least some of the competitive edge granted to countries with bad labor practices. At the end of the day, this type of solution is a worldwide win-win. Competitive advantages in terms of pricing will remain much the same (because of the differences in cost of living), and a higher wage to the lowest of the employees on the global market will only cut into the wealth of the wealthiest in the world. While shareholders may decry the dawn of age of privation, finding ways to convince the masses that their loss is everyone's loss, over 95% of the global population will benefit. Eliminating poverty eliminates the political raison d'etre of wars, trade and otherwise.

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